When the credit card reform legislation known as the CARD Act became law in 2009, many banks insisted that they’d be forced to impose annual fees on some cards and raise them on others. For the most part, that’s exactly what happened. But the news isn’t entirely bad.
Some cards are now offered in two versions: one with little or no annual fee, and a second with a higher fee. After a closer look, there are several cards where the higher annual fees are more than justified by the increased rewards and benefits…
The partnership between American Express and Delta is so close that they offer no less than five different versions of their co-branded SkyMiles cards – and that doesn’t even include their business cards!
Although their basic SkyMiles card and the “Options” cards made my list of the 7 Worst Rewards Credit Cards, the Platinum SkyMiles card is at the other end of the spectrum. Its $150 fee is easily justified by the free domestic companion certificate you get upon renewal. You could save $55 by applying for the Gold SkyMiles card, but its companion certificate costs $99 to use.
This card’s annual fee is $99, but Southwest is currently offering a sign-up bonus of 50,000 points – which is worth $830 toward most flights.
When you renew the card, you receive another $99 worth of points. You could apply for the Rapid Rewards Plus card with a $69 annual fee, but it offers a sign-up bonus worth only $50 in points when you renew the card.
This card has an annual fee of $59 that’s waived the first year, and it returns an outstanding 2 cents per dollar spent as a credit toward any travel expense – as well as a sign-up bonus worth $250.
You can get the VentureOne Rewards card with no annual fee, but it only returns 1.25 cents on the dollar and offers $100 as a sign-up bonus. Do the math and you’ll find that as long as you’re spending $4,720 on this card, the more expensive version will return more.
This cash rewards card stands out by offering 6 percent cash back on purchases from supermarkets, but it has a $75 annual fee. American Express also offers a non-preferred Blue Cash Everyday card that only returns a 3-percent rebate on your grocery spending and has no annual fee. It only takes $50 a week of grocery purchases to justify the Preferred card’s annual fee.
A word of warning…
The biggest danger here is that customers might be tempted to hold so many cards with high annual fees that it’s impossible to earn enough rewards from each card to justify its expense. Since your annual spending is limited, there will always be diminishing returns as you add more cards to your portfolio.
Choosing the best credit card is no longer simply a matter of finding the lowest fees. Only by taking into account the benefits – and not just the fees – can you determine which reward cards have annual fees that are worth paying.
For more on credit cards, check our credit card search tool.
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